Monday, January 23, 2012, AM | 1 Comment
First off, if your credit score is bad, remember to keep in mind that you didn’t get into this situation overnight. It takes months and years to get your score as bad as it is today. On the same token, you cannot improve on it overnight. So if a company tells you they can do it, they would be lying to you. Like they say, a thousand mile-journey starts with your first step. Don’t be discouraged. Slowly and surely you can improve your credit score.
You gotta start somewhere, sometime. Let today be your starting day. You need determination with complete control of your expenses. Follow these 3 steps and you would be on your way to improving your credit score. The most commonly used scoring system is produced by FICO Inc. Go over Understand How FICO Credit Score Works and see how scoring is done and what’s involved in it.
Get a free copy of your credit report
The very first step you should take is to Get Your Free Annual Credit Report Now. You must know where you are at so you can take further step to improve your credit score. Also, understand that Credit Bureaus Are Not Branches Of Government. The government has nothing to do with your credit score.
All FICO scores are based on your payment history, amounts owed, length of credit history, how much new credit you have asked for recently. It also depends on the types of credit used such as mortgages, credit cards, auto loans, student loans, etc.
Once you get your credit report, read it carefully. Make sure all information is accurate. Check for items that can damage your score, such as outstanding bills and judgments against you.
Clear up any discrepancies. Contact the agency about any mistakes. It’s not uncommon you find accounts that are not yours. If the problem is your making, then take necessary and appropriate steps to correct it.
Start making on-time payments
If you go over Understand How FICO Credit Score Works, you will find that the single biggest factor (35%) comes from whether you have paid your bills on time. If you are habitually late, then start paying bills before the due date even if it means you pay the very minimum every month. Your debt will increase drastically but your credit score may not be affected severely. Making payments on time will help improve your credit score.
Pay down as much debt as possible
You must come up with a plan to reduce your debt and keep doing it over the months ahead. Experts advise you should start with revolving debt like credit cards first. Then move on to other borrowing like auto loans, student loans and other personal loans. By paying off debt as much as possible, you will reduce your credit utilization. It will also help in the percentage of available credit that you are using. Paying down debt will help boost your score. In the FICO chart, amount owed is 30% of the whole pie. Keep lowering your debt owed as much as possible.
There are advertisements floating around on TV, online, and in print about credit repair firms solving your credit problems but they come with a hefty price tag. They can’t do anything to repair your credit that you cannot do yourself. You just have to apply yourself to your credit problem slowly and gradually and one step at a time.
Once you pay off on an account, don’t close it immediately or else you will reduce the amount of credit you have available. That could increase your utilization rate and hurt your score in the short run.
In a Nutshell
Like I mentioned above, you didn’t get to have bad credit score overnight and you sure can’t improve on it in one day. But if you are determined and take specific steps to start boosting your credit score, then slowly but surely a time will come – hopefully soon – that you would be able to get credit with favorable interest rate.